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heizer10_ch13_sg - 13 Aggregate Planning Summary In many...

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13 Aggregate Planning Summary In many situations, demand is not constant, and thus production planning requires greater attention to seasonal or cyclical fluctuations. The development of plans in response to demand forecasts is called aggregate planning or scheduling. The timing of production for the next 3 to 18 months will determine adjustments in labor levels, inventory levels, overtime, subcontracting, and other production variables within control. The objective is to minimize costs over the planning period subject to policies governing employment inventory, or customer service. Aggregate planning will tie the goals of manufacturers to production and the goals of service organizations to workforce schedules. To carry out aggregate planning the following is needed: A unit of measure such as pounds, cases, gallons A forecast of demand A model that combines forecasts and costs into a schedule Long range planning is often performed by the highest ranking officials of an organization, who will make strategic decisions governing capacity, location, product development, and research. Information for these decisions will come from throughout the organization. Operations managers, who start with the long-term capacity in place and schedule resources to match productivity with fluctuating demand, perform medium range planning. Short term planning breaks the aggregate plan into daily, weekly, or hourly detail. Short term planning also includes decisions such as loading, sequencing, expediting, and dispatching. Aggregate planning starts with the forecast. Usually there is no attempt to breakdown forecasts by product. Instead, the focus is on product families. This is because of the common elements within a product family that drives the utilization or consumption of resources (labor and machinery). In addition, to make aggregate planning work, the operations manager receives input from marketing, finance, human resources, and purchasing. The aggregate plan is the source for developing the master production schedule, which will determine product by product scheduling (master production schedule) and material requirements (material requirements planning). Discussion of these topics occur in later chapters. When developing the aggregate plan, a manager has some choices: levels of inventory, changes in workforce size, the use of part-time or overtime, the use of subcontractors, or demand management. Each of these will contribute to whether production chases demand (adjusts to fluctuations) or is level (build inventory and draw down on inventory as needed). The textbook describes eight options. Five adjust capacity by manipulating resources. Three of them attempt to adjust demand by techniques of marketing, back ordering, or mixing the product portfolio to offset seasonality.
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